Lehman Brothers Structured Note Investors are Pursuing Arbitration to Recover Losses

The recent Lehman Brothers bankruptcy has left investors with Lehman structured notes holding basically worthless investments. Many of these investors are now contacting stockbroker fraud lawyers throughout the United States to help them file FINRA arbitration claims against the brokers who sold them these structured notes as conservative and safe investments.

Lehman Brothers, which was once the fourth largest investment bank in the United States, filed for bankruptcy on September 15, 2008, marking the largest filing in history. The bankruptcy was caused by heavy investments in the subprime mortgage market, which many individual investors were not aware of when they purchased the notes that were sold as “principal protected” securities.

Structured notes, which are also known as hybrid financial instruments or structured equities, are investments that are constructed from a combination of stocks, bonds, currencies, commodities and derivatives.

The Lehman brothers notes were sold by brokers to retail investors as a low-risk and safe investment which guaranteed 100% principal protection. However, now that Lehman Brothers has filed bankruptcy, that guarantee is meaningless.

Several investors have filed claims against their brokers alleging that they continued to recommend these notes during the months leading up to the bankruptcy, even though the brokers knew or should have known that they were unsecured obligations of Lehman Brothers, whose financial position was weakening.

There were over $8 billion worth of Lehman structured notes outstanding at the time of the bankruptcy, and approximately $2.8 billion of those were sold this year.

Most of the investors who were sold these notes were of retirement age, and were looking for fixed income without the risks associated with stocks. Many are now seeking to recover their investment losses from the brokers who recommended these notes without disclosing the full extent of the risks.

Several large institutional investors have filed Lehman Brothers lawsuits directly against former executives of the investment bank, seeking to hold them responsible for misleading the public about the company’s financial position prior to the filing. However, most retail investors do not have the resources or losses to justify such litigation.

The Financial Industry Regulatory Authority (FINRA) oversees the activities of nearly 5,000 brokerage firms throughout the United States. Most broker agreements provide that disputes between investors and their broker can be filed as arbitration claims, which is allowing Lehman Brothers fraud lawyers to pursue recovery of structured note losses as low as $50,000.00.